Bonds are no longer recommended. Current research indicates 100% equities to be the best composition leading up to, and past, retirement.

To point, the economic uncertainties around geopolitics, AI, and war, plus irresponsible debt spending by governments and the prospect of QE (and higher inflation), is pushing long term rates steadily higher. There’s a reasonable chance that 30y treasuries are nearing 6% by the end of next year. Remember that rates and bond prices are inversely related. Anyone who holds bonds in this market will likely lose money. Holding to maturity won’t help much either because if inflation continues to rise, as is a major concern, most or all of that 5% yield gets eaten.

> Anyone who holds bonds in this market will likely lose money.

Yes, you lose money (or more precisely you lose opportunity) but you gain certainty. Which is what you want for retirement

That’s pretty much the definition of risk premium.

I sleep on certainty. I feel bad for the people based their futures entirely on a trajectory from a time we'll look back on as "utterly unsustainable".

If you don’t have hope when you have little else, you don’t have anything. The behavior is understandable, even if wildly irrational.

It depends on the goal / priority. In most financial / retirement advice they are focused on average middle class Americans. They tend to have too little savings, and not a lot of options.

If you have more than enough saved to meet your basic needs, it does (IMO) make sense to give up some total income for lower variance.

Bonds only give you certainty to the extent that inflation remains certain.

Stocks generally rise with inflation, whereas bonds continue paying out the same nominal amount, which buys you less over time.

As a retiree I'm 50/45/5 in stocks/bonds/cash, having opted for a conservative portfolio. The stocks are the only reason I haven't lost buying power. But the bonds have performed so poorly that I've barely kept up with inflation despite the amazing bull run in stocks.

Are we talking about bonds or government bonds here? The former will beat inflations assuming you don't just buy AAA rated ones. Investment grade perpetual bonds in US dollars yield over 6.5% on a Yield-to-call basis.

Which perpetual bonds yield 6.5% on a UTC basis?

You may not have heard of TIPS (Treasury Inflation-Protected Securities) but they give you certainty even if inflation is uncertain.

Currently you get 2.75% yield in real terms for the 30 year maturity: https://www.cnbc.com/quotes/US30YTIP

That's why you buy inflation linked bonds

Wow, I am surprised that you think 50% in stocks as a retiree is a "conservative portfolio".

> Bonds are no longer recommended. Current research indicates 100% equities to be the best composition leading up to, and past, retirement.

Are you referring to Anarkulova et al? Might be worth mentioning that the fixed income part is replaced with international equity, not more domestic equity.

That’s been something I’ve started doing. The nice part of the bond chunk of my investment portfolio is the current income aspect of it, with monthly dividends that give an annualized return of a touch under 4% on top of the capital growth.

4% on top of the capital growth? Please ELI5.

So there’s two ways you make money from any mutual fund: the first is that the value of the shares can go up (that’s called capital growth). The second is through dividends and distributions. Dividends will be higher with a bond fund than stocks just because the trend for the last few decades has been for corporations to focus on growing share price rather than paying out dividends to shareholders. Distributions are realized capital gains in the fund that are paid out to shareholders, typically annually or semiannually.¹ Stock funds usually pay dividends on a quarterly basis, while bond funds may pay monthly. In my case, I’m getting a monthly dividend of about ⅓% from my bond fond (Fidelity bond index fund), although checking my records, the share price has been relatively steady over the last few years so my IRR is not that much above the dividend rate.

Another good option for something that can give good current income is REIT stocks. The management fees on the funds that specialize in these tend to be high for my tastes (I like passively managed funds with management fees that could be rounding errors) so when I’ve had money in REITs, I’ve typically looked at the top stocks in the REIT funds and just bought those directly with dividend reinvestment. Note that because of the nature of REIT dividends and taxes, it’s better to use tax-advantaged accounts to buy these than to put money in a regular retail account towards them.²

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1. Back during the first dotcom goldrush when tech stocks were especially volatile (1999–2001 in particular), people who bought dotcom mutual funds in taxable accounts often ended up with a big distribution from the fund and a drop in share price greater than that distribution so that they would end up not only losing money on their investment but they also had a tax bill for their troubles since distributions will count as realized capital gains.

2. Important to note that I’m not a financial advisor and my advice is probably garbage.

What would you recommend to increase international equity exposure? Index funds ETF like VWRA?

For most people, $VT (or VWRA) is optimal. You should have a U.S. tilt because most growth is coming out of the U.S. $VT will naturally rebalance into international equities on that growth. If you already have a U.S. heavy portfolio and want more international exposure, $VXUS.

Stocks for the Long Run makes the pretty compelling case that over longer holding periods stocks are less risky than bonds.

Yes, and “I’m nearing retirement” is the opposite of the long run.

Their definition of long run and your definition of long run are probably different.

Also, it should be noted, just because it's the optimal to have the most $'s that shouldn't be the goal. The goal should be to survive your retirement with "enough".

And it should also be mentioned, most people can't stomach holding 100% equities, for a very good reason. When the 40-60% market crash happens, people get emotional and make emotional decisions. Sure there are the lucky few that can hold out, but most can't. Are you going to be one of the few lucky ones? If you haven't yet been through it once(last one in the USA was 2008/9), how do you know for sure?

TIPS are yielding 2.1-2.75% _real_ across the curve from 10 to 30 years out.

Worth noting the cost of dealing with Treasury's absolute dumpster fire of a website, though.

There’s TIPS ETFs

I bonds have to be bought from that website but tips can be bought from dealers.

Why not use a broker? I usually recommend Interactive Brokers here.

Bonds will give you poor (probably negative) real returns, but if you're 10-20 years away from dying you're more concerned with wealth preservation than growing your wealth.

People have forgotten this but equities are an infinite duration asset that are prone to periodic, significant, often violent crashes.

(Edit: often at a time when everyone is absolutely convinced they're the best asset class...)

You can keep some equity exposure but you don't want 1929 or 2008 to happen the day after you retire when you might live for another 30 years

> Remember that rates and bond prices are inversely related. Anyone who holds bonds in this market will likely lose money.

That's assuming you sell the bonds before their end.

"Current research" Citation needed. Multiple, given the extraordinary claim.

Could you please link to the research?

The theory I have seen when they say we should convert into bounds near retirement is that you don't really get to decide when to sell, that's money you need to live. And if you are unlucky enough to need money when there is a market crash, you are screwed.

Bounds are not as volatile, so even if you lose some money from inflation, you are less likely to lose a lot of money, money you need to live, from the whims of the market. You want to protect your capital, yields don't matter as much if you near the end of your life.

If you are younger, and you make reasonable investments and not gambles, you can expect that your value will go up (more so than with bounds) within a decade or two, and because you have income, you don't need that money and you can wait for the market to recover before selling.

This is absolutely terrible advice and is out of touch with modern financial understanding. Bonds feel psychologically safer, but lead to failure more often than total market equity portfolios, even when you account for market crashes.

https://youtu.be/p25PPBgMiEk

I agree with everything in the video you linked (which is not surprising, given it's Ben Felix). That includes the parts about equities being less risky than bonds in very important ways, but also the parts about behavioral loss tolerance and risk capacity, and how they can indicate higher bond allocation.

So I disagree that "If you're dreading equity drawdowns, that's what fixed income is for" is absolutely terrible advice.

I always thought the psychological safety was exactly part of the point, since 100% equity portfolios do better in theory than practice, because people are more likely to panic sell.

One can argue that it is also literal safety.

If I’m 70 years old in 2008, the knowledge that my all-equities portfolio that lost 50% of its value would have recovered in 5 years and outperformed bonds/cash equivalents in 10 years is no consolation.

If I’m 70 years old and have $2,000,000, I don’t need to turn that $2,000,000 into $3,000,000, I need to make sure I don’t turn that into $1,500,000 or $1,000,000 before I get a chance to spend it.

If the 2008 crash is a once-in-a-century recession, that napkin maths out to a 20% chance of that sort of thing occurring during my last 20 years of life.

I feel like I should go learn some more. I'm not in a pure index fund, I'm really in VFORX (almost completely, I'm not too original nor sophisticated financially and don't try to pick my own stock picks these days except with my "lunch money" just for fun). Do you think something like VFORX is a bad option? It's actively managed, so the fees will be a little higher than a pure index fund, but it's Vanguard and the fees are still really low. And it has total market components in addition to bonds.

Active management in general is a poor idea. You'll get better risk adjusted returns by investing in total world equities (like VT). Check out Bogleheads to learn the basics. If you want to get more advanced, you can learn about factor investing as well, but VT is enough for the vast majority.

If you want to get intuition for why this works, this is a really fun and interesting video: https://youtu.be/TQuxVz52w2w

For VFOROX, the expense ratio is 0.08% which is pretty low. Also VT is 45% of it. VFOROX looks well balanced to me, with 3:1 equity to bond ratio.

https://investor.vanguard.com/investment-products/mutual-fun...

The boglehead approach has worked fantastically for ~40 years, but now that everyone is doing it, it may no longer be the case going forwards.

Normally with these things when absolutely everyone is crowded on one side of the boat, you want to be on the other side

What exactly is the opposite side? Is it actively managing a portfolio? Because most people don't have the time to do that.

What you said is not what the linked video says, so at best this is terrible advice piling onto terrible advice.

It is precisely what the video says. Ben has discussed this multiple times as well, not just in this video. If you have better behavioral tolerance for volatility (as in you're not the type to panic sell), total market equities will outperform and lead to less failure in retirement.

While partially true, that "If you have better behavioral tolerance for volatility" is HUGE. Most people can not do this. Once they see their net worth go from $x to $x/2 or worse, they panic sell. People are emotional beings and it's very very hard to not let your emotions dictate what's going on.

If you haven't lived through a market panic and crash(last one in the US was 2008/2009), then chances are you shouldn't count yourself as being able to do it.

Also, their 100% equity time frames are measured in many lifetimes, not in a single lifetime.

If the goal is to have the biggest $ balance, then sure 100% equities for the win, but if the goal is to survive your retirement with little worry, 100% equities is a terrible idea.

Bonds provide stable cash flow. Equities provide growth/return. Use both in the appropriate amounts for your situation.

    > Bonds provide stable cash flow. Equities provide growth/return. Use both in the appropriate amounts for your situation.

This is sound advice. I want to add some nuance about "bonds": Consider some broad categories: (1) regular gov't bonds, (2) inflation protected gov't bonds, (3) investment grade corporate bonds, and (4) high yield corporate bonds. In category (4), it is possible to get both cash flow and capital appreciation. It is the bond-equivalent of "stock picking".

Indeed. Category #4 "high yield corporate bonds" are also known as "Junk bonds" because they kind of suck at the stable cashflow part, since they tend to go to $0 sometimes, much like stocks.

Technically when bonds "go to $0", you actually get priority over any corporate assets vs stock ownership, but if the bond went to $0, there is likely not a lot of assets left either. So you can't expect to get saved completely from whatever asset sale happens.

Credit events (late payments, bankruptcy, etc.) for junk bonds are much less rare than people think. If there is bankruptcy, usually it is Chapter 11 which allows for re-org.

    > Technically when bonds "go to $0"

Extremely unlikely, unless there is massive accounting fraud. Recovery rates are on average about 45-55% (since 1987 according to research by S&P).

> Recovery rates are on average about 45-55% (since 1987 according to research by S&P).

Exactly.

I'm technically not really in pure index funds, I just wanted to avoid trying to complicate my thoughts. Nearly all of my investments are in VFORX or Schwab's equivalent, and have been for a long time. So they are really composed of total market funds, bonds, etc, and Vanguard changes the ratio a bit as 2036 approaches. So while not really an index fund, from my perspective as a lay investor I treat it like that and consider myself an honorary Boglehead. I just put money in and forget about it.

I looked at the fund (VFORX) here: https://investor.vanguard.com/investment-products/mutual-fun...

It looks excellent for your needs, and have an incredibly low expensive ratio of 8bps(!). Currently, it is 75% stocks, and 25% bonds. Don't worry about a bubble in the stock market.

EDIT (after reading many, many more negative comments below):

The problem with discussing your investments online, there are a million negative replies. No one ever says: "Yeah, looks pretty good. Leave it alone." I'm here to be that guy.

> I'm here to be that guy.

I really appreciate when someone chooses to be that guy.

As others have pointed out, bonds are barely (or not) keeping up with inflation. I would like to suggest a third alternative to stock index and bonds: stable dividend stocks. They should increase in value along with inflation but still pay out a steady dividend as long as the company is strong.

Buy inflation linked bonds? They won't yield much above inflation but if you have >1M that's enough to last through retirement.

With the big caveat that strong dividend yields can be an indicator that the market is considering the company to do poorly in the future.

Very different risk profiles.

Bonds are about steady cash flow, not about total return. "stable" dividend stocks are almost never really stable when the financial world crashes.

    > "stable" dividend stocks are almost never really stable when the financial world crashes.

Completely agree. Also, many div stocks are just one industrial accident or scandal away from a huge drop in their stock price. People who tout preferred shares are in a similar camp in my opinion. As we discovered in 2008/2009, during a crash, there is no where safe except cash. Suddenly, all financial assets have a correlation of 1.0.

    > As others have pointed out, bonds are barely (or not) keeping up with inflation.

I see this sentiment a lot, but the stats do not hold up. For example, the annual inflation rate in the US in 2025 was 2.7%. That number comes from the US Bureau of Labor Statistics.

For looking at corporate bond rates, it is useful to consider the Bloomberg US Aggregate Bond Index (aka "the Agg"). It has a weighted average maturity of about 8 years (intermediate-term), currently has a yield-to-maturity of about 4.75%.

Everytime I see a debate of stocks vs bonds on the Internet, someone pops into the convo to remind everyone about "stable" dividend stocks. Honestly, for sophisticated investors, I just to don't see this strategy frequently deployed. It seems more like talking heads on the Internet. Has anyone done backtesting on performance of high div stocks vs some combination of S&P 500 and investment grade corp bonds? I would expect the latter to greatly outperform.

One of the lessons from 2008 is that even the contrary position gets obliterated when the whole damn system implodes.

So, the optimists all swim in the cash while your contrary position fails to keep pace with the bull market; and then the bear market hits and you all get obliterated equally.

You absolutely need to get inflation adjusted bonds. Otherwise you’ll get wiped out. I am in the krugman, stiglitz monetary camp; so not prone to constant fear of hyperinflation but what the government is doing makes inflation certain and the only way out a fairly painful recession either of will be hard on equity and bonds.

The market of a good leader is a lack of chaos. We are seeing the effects of a chaotic mind untethered from an accurate view of reality. Buckle up